The Transatlantic Trade and Investment Partnership (TTIP): Short term gain for long term pain?

From the very beginning, facilitating trade has been a key aim of the European Union (EU) and its predecessors. One of the current trade projects being negotiated is the Transatlantic Trade and Investment Partnership, which enters the second stage of negotiation this week (11th-15th November 2013). TTIP, as it is known, is a wide-ranging free trade pact between the United States of America (US) and the EU. If the negotiations are successful and the treaty is ratified, TTIP would be one of the world’s largest trade agreements, rivalling the North American Free Trade Agreement (NAFTA). The pact would remove barriers, cut tariffs, and unify regulations between the EU and the US; or, to put it simply, it would further liberalize trade between two of the world’s biggest economies.

Could TTIP really be such an easy windfall for both EU and US economies, though? Is there no possible downside to this deal, or, more generally, to the endless free trade and globalisation clearly outlined in Mr Froman’s speech?

TTIP threatens to reduce current EU regulatory standards in many important fields. In doing so, TTIP could significantly reduce living standards for millions of European citizens if specific standards are not clearly outlined in the final deal. The EU and US approaches to regulatory standards are fundamentally different. While the US insists that products are barred from the market only if proven to be harmful to the public (“science-based approach”), the EU maintains that producers must first establish that their products do not have a detrimental effect on citizens (“precautionary principle”). This difference in positions has given Europe much stronger governmental regulation.

Both negotiating parties have declared that there will be no negative impact on current standards in the EU or the US. However, this seems impossible: a difference in regulation would tip the economic balance between the parties, creating an inequality where one market is not competitive in terms of costs. It seems unlikely that the US will change its ‘scientific approach’, as raising standards would both have significant economic costs and go against their liberal policies. There has been no indication that they plan to adopt the EU’s precautionary approach and as the negotiations are currently confidential there is very little way of knowing. Therefore the higher EU standards risk being eroded in response to this new market place.

Transatlantic trade is an important part of the EU economy. A wide range of existing initiatives and deals at both EU and Member State levels are currently facilitating over €2 billion of trade per day in goods and services. The idea behind TTIP is to increase this interaction, to help increase economic growth and employment opportunities, and thereby improving the lives of millions of citizens on both sides of the Atlantic. However, liberalizing trade and trying to unify two very different regulatory systems could result in the destruction of standards which protect such citizens, particularly in Europe.

Doubts have also been raised about the viability of the promised financial benefits, with some suggesting that, rather than creating jobs, deals such as TTIP can actually lead to an overall rise in unemployment, and job losses, especially in particularly vulnerable areas, such as manufacturing. The outcome could be a reduction in regulation protecting citizens, in exchange for very few gains in terms of employment and incomes. Diluting strong regulations in exchange for growth also sets a poor example to other nations. The EU is a leader in strong environmental, worker welfare, and food safety legislation. Would the EU really be able to influence other nations to create better policy in these fields, if it reduces its own standards? Perhaps EU citizens should ask questions about the long term impact of trade liberalization deals such as TTIP, and ask whether the short-term gain of potential jobs and potential growth are really outweighed by the long-term costs of weaker legislation.

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About Chris Diskin

Chris is the current Economic Justice Programme Assistant. He joined QCEA in September 2013 after completing a range of internships in political intelligence and economic equality. Chris is particularly interested in the impact of international trade deals on economic inequality. However, he can be contacted about any aspect of economic inequality.